Should Entrepreneurs Follow Google And Facebook In Their Land Rush?

Last month, Facebook paid $395 million to buy a warehouse and office park about 30 miles south of San Francisco. Over time, the Company will be replacing the existing orthopedic surgical tools company, supermarket distribution center, and office-furniture storage warehouse.

Last year,
Google spent over $1 billion for a slew of properties in Silicon Valley near its Mountain View, California headquarters.

Obviously, the big boys think real estate is a great investment. Should entrepreneurs follow?

The Wall Street Journal recently reported on this 21st Century land rush, and it reminded me of countless discussions with middle market business owners wrestling with the issue of owning or leasing their facilities. My general advice has been that entrepreneurs should be very careful to separate their investment decisions: the real estate ownership decision is, in most cases, irrelevant to the core of their business operations. You can choose whether to make the real estate investment, but don’t confuse it with your core business.

The tech land rush is being fueled by considerations that most “ordinary” businesses just don’t face. First off, the companies are building out spaces that would be nearly comical to most of us. A lawyer for Facebook and Salesforce commented in the Wall Street Journal article that those companies wanted to make sure their facilities could have rock climbing walls among other luxuries. Similarly, the article comments that one of Salesforce’s recent leases restricts the number of dogs that can be in the building to 10. So, if you want to build a carnival and a zoo at your place of work, you might want to consider owning the facility. But, for most of us, it probably isn’t necessary.

Additionally, these tech giants are competing with each other for visual dominance. Google doesn’t want Amazon signage nearby, and vice versa. Since most entrepreneurs don’t control enough space for this to be meaningful, this sort of ego driven brand control isn’t a consideration.